Natural Grocers by Vitamin Cottage, Inc 10-K for FY2023

Natural Grocers by Vitamin Cottage, Inc. (NGVC)

10-K 2023-12-07 For: 2023-09-30

Added on April 07, 2026

About this 10-K

Natural Grocers by Vitamin Cottage, Inc filed this 10-K on December 7, 2023, covering the fiscal year ended September 30, 2023 (FY2023).

Headline figures

Fiscal year ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.14B; up 4.7% from $1.09B a year earlier
Net income: $23.24M; up 8.8% from net income of $21.37M a year earlier
Diluted EPS: $1.02; up 8.5% from $0.94 a year earlier

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Delaware	45-5034161
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	NGVC	New York Stock Exchange

Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☒

		Emerging growth company ☐

		Page Number

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	38
Item 2.	Properties	39
Item 3.	Legal Proceedings	39
Item 4.	Mine Safety Disclosures	39

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Reserved	40
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8.	Financial Statements and Supplementary Data	54
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	79
Item 9A.	Controls and Procedures	79
Item 9B.	Other Information	79
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	79

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	80
Item 11.	Executive Compensation	80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
Item 13.	Certain Relationships and Related Transactions, and Director Independence	80
Item 14.	Principal Accounting Fees and Services	80

PART IV
Item 15.	Exhibits, Financial Statement Schedules	81
Item 16.	Form 10-K Summary	84

SIGNATURES		85

State	Number of Stores
Arizona	12
Arkansas	3
Colorado	44
Idaho	5
Iowa	6
Kansas	8
Louisiana	1
Minnesota	1
Missouri	7
Montana	4
Nebraska	3
Nevada	3
New Mexico	6
North Dakota	3
Oklahoma	6
Oregon	14
South Dakota	1
Texas	23
Utah	8
Washington	5
Wyoming	2

	Year ended September 30,
	2023			2022			2021
Statements of Income Data:*
Net sales		100.0	%		100.0			100.0
Cost of goods sold and occupancy costs		71.3			72.0			72.3
Gross profit		28.7			28.0			27.7
Store expenses		22.6			22.2			22.2
Administrative expenses		3.2			2.9			2.7
Pre-opening expenses		0.2			0.1			0.1
Operating income		2.8			2.8			2.7
Interest expense, net		(0.3	)		(0.2	)		(0.2	)
Income before income taxes		2.5			2.5			2.5
Provision for income taxes		(0.4	)		(0.6	)		(0.5	)
Net income		2.0	%		2.0			1.9

Other Operating Data (Unaudited):
Number of stores at end of period	165		164	162
Store unit count increase period over period	0.6	%	1.2	1.9
Change in daily average comparable store sales	3.6	%	2.6	0.7
Number of new stores opened during the period	3		3	3
Number of stores relocated/remodeled during the period	3		2	5
Number of stores closed during the period	2		1	—
Gross square footage at end of period⁽¹⁾	2,676,607		2,688,589	2,649,532
Selling square footage at end of period⁽¹⁾	1,745,701		1,742,623	1,719,813

	Year ended September 30,						Change in
	2023			2022			Dollars			Percent
Statements of Income Data:
Net sales	$	1,140,568			1,089,625			50,943			4.7	%
Cost of goods sold and occupancy costs		813,637			784,744			28,893			3.7
Gross profit		326,931			304,881			22,050			7.2
Store expenses		257,282			242,057			15,225			6.3
Administrative expenses		35,973			31,562			4,411			14.0
Pre-opening expenses		2,007			1,107			900			81.3
Operating income		31,669			30,155			1,514			5.0
Interest expense, net		(3,299	)		(2,371	)		(928	)		39.1
Income before income taxes		28,370			27,784			586			2.1
Provision for income taxes		(5,127	)		(6,419	)		1,292			(20.1	)
Net income	$	23,243			21,365			1,878			8.8	%

	Page Number
Reports of Independent Registered Public Accounting Firm	55
Consolidated Balance Sheets as of September 30, 2023 and 2022	58
Consolidated Statements of Income for the years ended September 30, 2023, 2022 and 2021	59
Consolidated Statements of Cash Flows for the years ended September 30, 2023, 2022 and 2021	60
Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2023, 2022 and 2021	61
Notes to Consolidated Financial Statements	62

	September 30,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	18,342			12,039
Accounts receivable, net		10,797			10,496
Merchandise inventory		119,260			113,756
Prepaid expenses and other current assets		4,151			4,369
Total current assets		152,550			140,660
Property and equipment, net		169,060			157,179
Other assets:
Operating lease assets, net		287,941			307,132
Finance lease assets, net		45,110			43,554
Deposits and other assets		395			452
Goodwill and other intangible assets, net		14,129			14,131
Total other assets		347,575			365,269
Total assets	$	669,185			663,108
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	80,675			71,283
Accrued expenses		33,064			26,737
Term loan facility, current portion		1,750			1,750
Operating lease obligations, current portion		34,850			34,735
Finance lease obligations, current portion		3,690			3,223
Total current liabilities		154,029			137,728
Long-term liabilities:
Term loan facility, net of current portion		5,938			13,938
Operating lease obligations, net of current portion		276,808			295,064
Finance lease obligations, net of current portion		47,142			44,664
Deferred income tax liabilities, net		14,427			15,902
Total long-term liabilities		344,315			369,568
Total liabilities		498,344			507,296
Commitments (Notes 11 and 18)
Stockholders’ equity:
Common stock, $0.001 par value. 50,000,000 shares authorized, 22,745,412 and 22,690,188 shares issued at September 30, 2023 and 2022, and 22,738,915 and 22,690,188 shares outstanding at September 30, 2023 and 2022, respectively		23			23
Additional paid-in capital		59,013			58,072
Retained earnings		111,871			97,717
Common stock in treasury at cost, 6,497 shares at September 30, 2023		(66	)		—
Total stockholders’ equity		170,841			155,812
Total liabilities and stockholders’ equity	$	669,185			663,108

	Common stock –$0.001 par					Additional								Total
	value					paid-in		Retained			Treasury			stockholders’
	Shares outstanding			Amount		capital		earnings			stock			equity
Balances at September 30, 2020		22,546,765		$	23	$	56,752	$	116,291		$	—		$	173,066
Net income		—			—		—		20,581			—			20,581
Share-based compensation		—			—		537		—			—			537
Issuance of common stock		73,652			—		—		—			—			—
Cash dividends		—			—		—		(51,453	)		—			(51,453	)
Balances at September 30, 2021		22,620,417			23		57,289		85,419			—			142,731
Net income		—			—		—		21,365			—			21,365
Share-based compensation		—			—		783		—			—			783
Issuance of common stock		69,771			—		—		—			—			—
Cash dividends		—			—		—		(9,067	)		—			(9,067	)
Balances at September 30, 2022		22,690,188			23		58,072		97,717			—			155,812
Net income		—			—		—		23,243			—			23,243
Share-based compensation		—			—		941		—			115			1,056
Issuance of common stock		66,725			—		—		—			—			—
Repurchase of common stock		(17,998	)		—		—		—			(181	)		(181	)
Cash dividends		—			—		—		(9,089	)		—			(9,089	)
Balances at September 30, 2023		22,738,915		$	23	$	59,013	$	111,871		$	(66	)	$	170,841

	Useful lives			As of September 30,
	(in years)			2023			2022
Construction in process	n/a			$	15,221			8,651
Land	n/a				6,746			6,746
Buildings	16	–	40		46,412			43,010
Land improvements	1	–	24		2,112			1,822
Leasehold and building improvements	1	–	25		173,407			163,721
Fixtures and equipment	5	–	7		157,710			151,242
Computer hardware and software	3	–	5		27,080			25,545
					428,688			400,737
Less accumulated depreciation and amortization					(259,628	)		(243,558	)
Property and equipment, net				$	169,060			157,179

Fiscal year	Amortization expense
2024	$	1,684
2025		1,659
2026		1,550
2027		1,314
2028		1,194
Thereafter		1,141
Total amortization expense	$	8,542

		Year ended September 30,
Lease cost	Classification	2023			2022			2021
Operating lease cost:
	Cost of goods sold and occupancy costs	$	43,913			42,979			42,652
	Store expenses		319			337			319
	Administrative expenses		327			309			305
	Pre-opening expenses		269			275			233
Finance lease cost:
Depreciation of lease assets	Store expenses		3,746			3,832			3,618
	Pre-opening expenses ⁽¹⁾		446			210			68
Interest on lease liabilities	Interest expense, net		1,837			1,896			1,931
	Pre-opening expenses ⁽¹⁾		482			218			22
Short-term lease cost	Store expenses		3,071			2,900			326
Variable lease cost	Cost of goods sold and occupancy costs ⁽²⁾		6,429			5,851			5,611
Sublease income	Store expenses		(323	)		(302	)		(313	)
Total lease cost		$	60,516			58,505			54,772

Fiscal year	Operating leases			Finance leases			Total
2024	$	45,966			5,961			51,927
2025		44,628			6,051			50,679
2026		41,777			6,093			47,870
2027		39,983			6,138			46,121
2028		37,151			5,053			42,204
Thereafter		170,998			40,841			211,839
Total future undiscounted lease payments		380,503			70,137			450,640
Less imputed interest		(68,845	)		(19,305	)		(88,150	)
Total reported lease liability		311,658			50,832			362,490
Less current portion		(34,850	)		(3,690	)		(38,540	)
Noncurrent lease liability	$	276,808			47,142			323,950

Fiscal year	Third parties		Related parties		Sublease rental income			Total leases
2024	$	50,709		1,218		(353	)		51,574
2025		49,461		1,218		(277	)		50,402
2026		46,730		1,140		(279	)		47,591
2027		45,275		846		(192	)		45,929
2028		41,474		730		(85	)		42,119
Thereafter		205,755		6,084		(67	)		211,772
Total payments	$	439,404		11,236		(1,253	)		449,387

	Shares			Weighted average grant date fair value
Non-vested as of September 30, 2021		388,139		$	10.38
Granted		45,542			12.87
Forfeited		(6,168	)		9.93
Vested		(96,719	)		10.29
Non-vested as of September 30, 2022		330,794			10.68
Granted		195,067			11.74
Forfeited		(17,213	)		11.16
Vested		(93,698	)		10.41
Non-vested as of September 30, 2023		414,950			11.28

1.	Financial Statements: See Part II, Item 8 of this Form 10-K.

2.	Financial Statement Schedules: Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes herein.

3.	Exhibits:

Exhibit Number	Description	Form	File No.	Exhibit Number	Filing Date
3.1	Amended and Restated Certificate of Incorporation	Form S-1	333-182186	3.1	July 5, 2012
3.2	Amended and Restated Bylaws	Form S-1	333-182186	3.2	July 5, 2012
4.1	Reference is made to Exhibits 3.1 and 3.2
4.2	Specimen Common Stock Certificate	Form S-1	333-182186	4.2	July 20, 2012
4.3	Form of Notice of Grant of Stock Unit Award	Form S-8	333-182886	4.2	July 27, 2012
4.4	Form of Registration Rights Agreement	Form S-1	333-182186	4.3	July 5, 2012
4.5	Form of Notice of Stock Grant Award	Form 10-K	001-35608	4.5	December 5, 2019
4.6	Description of Capital Stock	Form 10-K	001-35608	4.6	December 5, 2019
10.1	Second Amended and Restated Employment Agreement by and between Vitamin Cottage Natural Food Markets, Inc., Natural Grocers by Vitamin Cottage, Inc. and Sandra M. Buffa, dated June 26, 2012*	Form 10-Q	001-35608	10.1	January 29, 2015
10.2	Form of Omnibus Incentive Plan*	Form S-1	333-182186	10.16	July 5, 2012
10.3	Summary of Compensation Arrangements for Non-Employee Directors*	—	—	—	—
10.4	Form of Indemnification Agreement*	Form S-1	333-182186	10.18	June 29, 2012
10.5	Shopping Center Lease by and between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc., dated January 1, 2010	Form S-1	333-182186	10.19	June 29, 2012
10.6	Ground lease by and between 3801 East Second Avenue, LLC and Vitamin Cottage Natural Food Markets, Inc., dated March 1, 2001	Form S-1	333-182186	10.20	June 29, 2012
10.7	Commercial Lease by and between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc., dated June 1, 2006	Form S-1	333-182186	10.21	June 29, 2012
10.8	Lease by and between Chalet Properties, LLC and Boulder Vitamin Cottage Group, LLC, dated July 1, 2011	Form S-1	333-182186	10.24	June 29, 2012
10.9	Lease by and between Isely Family Land Trust, LLC and Vitamin Cottage Natural Food Markets, Inc., dated February 29, 2012	Form S-1	333-182186	10.25	June 29, 2012
10.10	Lease by and between Chalet Properties, Austin, LLC and Vitamin Cottage Natural Food Markets, Inc., dated February 29, 2012	Form S-1	333-182186	10.26	June 29, 2012
10.11	Building Lease by and between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc., dated December 8, 2010	Form S-1	333-182186	10.27	June 29, 2012
10.12	Distribution Agreement between United Natural Foods, Inc. and Vitamin Cottage Natural Food Markets, Inc., dated May 20, 2008#	Form S-1	333-182186	10.28	June 29, 2012
10.13	Addendum A to Distribution Agreement between United Natural Foods, Inc. and Vitamin Cottage Natural Food Markets, Inc., dated February 27, 2009#	Form S-1	333-182186	10.29	June 29, 2012

10.14	Agreement Addendum to Distribution Agreement between United Natural Foods, Inc. and Vitamin Cottage Natural Food Markets, Inc., dated March 10, 2012#	Form S-1	333-182186	10.30	June 29, 2012
10.15	Third Amendment to Distribution Agreement between United Natural Foods, Inc. and Vitamin Cottage Natural Food Markets, Inc., dated June 3, 2012#	Form S-1	333-182186	10.31	June 29, 2012
10.16	Form of Stockholders Agreement, by, between and among Natural Grocers by Vitamin Cottage, Inc. and the stockholders to be named therein	Form S-1	333-182186	10.32	July 12, 2012
10.17	Credit Agreement dated as of January 28, 2016 by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent and L/C Issuer	Form 10-Q	001-35608	10.39	January 28, 2016
10.18	Security and Pledge Agreement dated as of January 28, 2016 by and among Vitamin Cottage Natural Food Markets, Inc., Natural Grocers by Vitamin Cottage, Inc., Vitamin Cottage Two Ltd. Liability Company, the other Obligors thereunder and Bank of America, N.A.	Form 10-Q	001-35608	10.40	January 28, 2016
10.19	Customer Distribution Agreement by and among United Natural Foods, Inc., Tony’s Fine Foods, Albert’s Organics and Vitamin Cottage Natural Food Markets, Inc. dated as of June 21, 2016#	Form 10-Q	001-35608	10.1	May 6, 2021
10.20	First Amendment to Credit Agreement dated as of May 10, 2016, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent and L/C Issuer	Form 10-Q	001-35608	10.42	July 28, 2016
10.21	Incentive Compensation Program*	Form 10-Q	001-35608	10.43	February 2, 2017
10.22	Second Amendment to Credit Agreement dated as of September 6, 2017, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender	Form 10-K	001-35608	10.44	December 7, 2017
10.23	Autoborrow Agreement dated as of September 6, 2017, by and between Vitamin Cottage Natural Food Markets, Inc. and Bank of America, N.A.	Form 10-K	001-35608	10.45	December 7, 2017
10.24	Employment offer letter to Todd Dissinger dated December 5, 2017*	Form 10-Q	001-35608	10.46	February 1, 2018
10.25	Notice of Grant of Stock Unit Award to Todd Dissinger dated January 2, 2018*	Form 10-Q	001-35608	10.47	February 1, 2018
10.26	Amendment dated as of May 25, 2018 to Customer Distribution Agreement dated as of June 21, 2016 by and among United Natural Foods, Inc., Tony’s Fine Foods, Albert’s Organics and Vitamin Cottage Natural Food Markets, Inc.#	Form 10-Q	001-35608	10.48	August 2, 2018
10.27	Natural Grocers by Vitamin Cottage, Inc. 2012 Omnibus Incentive Plan, as amended*	Form 8-K	001-35608	10.49	March 8, 2019
10.28	First Amendment to Lease dated as of July 31, 2019 by and between Chalet Properties, Austin, LLC and Vitamin Cottage Natural Food Markets, Inc.	Form 10-Q	001-35608	10.49	August 1, 2019
10.29	Third Amendment to Credit Agreement dated as of November 13, 2019, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender	Form 10-K	001-35608	10.51	December 5, 2019

10.30	Amended and Restated Lease, dated August 3, 2020, between Chalet Properties of Pueblo, LLC and Vitamin Cottage Natural Food Markets, Inc.	Form 10-Q	001-35608	10.1	August 6, 2020
10.31	Fourth Amendment to Credit Agreement dated as of November 18, 2020, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender	Form 8-K	001-35608	10.1	November 24, 2020
10.32	Fifth Amendment to Credit Agreement dated as of September 16, 2021, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the Lenders Party thereto and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender	Form 8-K	001-35608	10.1	September 16, 2021
10.33	Lease, dated May 4, 2022, between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc.	Form 10‑Q	001-35608	10.1	May 5, 2022
10.34	Sixth Amendment to Credit Agreement dated as of December 15, 2022, by and among Vitamin Cottage Natural Food Markets, Inc., the Guarantors party thereto, the lenders party, and Bank of America, N.A as Administrative Agent, L/C Issuer and Swing Line Lender	Form 8-K	001-35608	10.1	December 21, 2022
10.35	First Amendment to Lease, dated May 3, 2023, by and between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc.	Form 10-Q	001-35608	10.1	May 4, 2023
10.36	Amendment to Commercial Lease, dated May 3, 2023, by and between Chalet Properties, LLC and Vitamin Cottage Natural Food Markets, Inc.	Form 10-Q	001-35608	10.2	May 4, 2023
10.37#	Amended and Restated Customer Distribution Agreement, dated August 23, 2023, between Vitamin Cottage Natural Food Markets, Inc. and United Natural Foods, Inc.	—	—	—	—
14	Code of Ethics	Form 10-K	001-35608	14	December 13, 2012
21.1	List of subsidiaries	Form 10-K	001-35608	21.1	December 13, 2012
23.1	Consent of KPMG LLP	—	—	—	—
31.1	Certification of Kemper Isely, a Principal Executive Officer Required Under Section 302(a) of the Sarbanes-Oxley Act of 2002	—	—	—	—
31.2	Certification of Zephyr Isely, a Principal Executive Officer Required Under Section 302(a) of the Sarbanes-Oxley Act of 2002	—	—	—	—
31.3	Certification of Todd Dissinger, Principal Financial Officer Required Under Section 302(a) of the Sarbanes-Oxley Act of 2002	—	—	—	—
32.1	Certification of Principal Executive Officers and Principal Financial Officer Required Under 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002†	—	—	—	—
97	Incentive Compensation Recoupment Policy	—	—	—	—

101	The following materials from Natural Grocers by Vitamin Cottage, Inc.’s Annual Report on Form 10-K for the year ended September 30, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Stockholders’ Equity, and (v) Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	Natural Grocers by Vitamin Cottage, Inc.


	By:	/s/ KEMPER ISELY
		Kemper Isely,
		Its Co-President

Name	Title	Date


/s/ KEMPER ISELY	(Principal Executive Officer, Co-President,
Kemper Isely	Director)	December 7, 2023


/s/ ZEPHYR ISELY	(Principal Executive Officer, Co-President,
Zephyr Isely	Director)	December 7, 2023


/s/ TODD DISSINGER	(Principal Financial and Accounting Officer,
Todd Dissinger	Chief Financial Officer)	December 7, 2023


/s/ ELIZABETH ISELY	Director
Elizabeth Isely		December 7, 2023


/s/ HEATHER ISELY	Director
Heather Isely		December 7, 2023


/s/ SANDRA BUFFA	Director
Sandra Buffa		December 7, 2023


/s/ EDWARD CERKOVNIK	Director
Edward Cerkovnik		December 7, 2023


/s/ RICHARD HALLÉ	Director
Richard Hallé		December 7, 2023


/s/ DAVID ROONEY	Director
David Rooney		December 7, 2023

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Produce Pricing Grid
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Credit Reason	Description
Undelivered Sales (Billed Not Received (BNR) / Short on Load (SOL))	Product listed on invoice not received at time of delivery. Identify shortages upon delivery to the UNFI Driver whenever possible.
Mis-pick	Received another product in place of product ordered. Item has correct selection sticker but different item is in box. Your claims representative will need the UPC code of item received.
Quality/Customer Returns	Item is un-sellable due to manufacturer’s defect (E.g. No safety seal; moldy; etc.) Note: Your claim representative may notify you if the Supplier will not allow UNFI to process quality issues. Expiration date or lot numbers from the product are required to receive credit.
Damaged	Product damaged upon receipt.
Short Dated	Product short-dated according to UNFI policy at time of delivery. Provide expiration date to request credit. While specific expiration dates vary between products, most items are offered at least [*] on non-perishable and [*] on perishable.
Misorder – Dry Grocery	Orders returned to the UNFI warehouse as refused or undelivered may be subject to a higher fee. A restocking fee may apply.
Misorder – Freezer or Cooler	No credit

	/s/ Kemper Isely
	Kemper Isely
	Co-President and a Principal Executive Officer

	/s/ Todd Dissinger
	Todd Dissinger
	Chief Financial Officer and Principal Financial Officer